Ugh. Just when it looks like Amgen, Inc. (NASDAQ:AMGN) shares are going to find the catalyst they need to break out of a two-year rut, news comes along to upend the effort AMGN stock has been piecing together since June.
The news in question was the announcement that a highly ballyhooed Kyprolis failed to show meaningful efficacy in a phase 3 trial as a first-line treatment for multiple myeloma. While the drug showed promise in the smaller-scale phase 2 of the trial and Kyprolis has still been approved for other uses — including advanced multiple myeloma — it didn’t perform any better than Takeda Pharmaceutical’s Velcade, which is the current go-to therapy.
AMGN stock is down a bit on the news. Though the 1% lull today is survivable, it’s discouraging to see the pullback take shape within sight of new all-time highs.
Current and would-be investors can take heart, however. AMGN is still buy-worthy.
Kyprolis Misses the Mark
Kyprolis wasn’t developed by Amgen. Rather, Amgen acquired Kyprolis in 2013 via the acquisition of Onyx Pharmaceuticals for $10.4 billion. At the time, the drug had only been approved for the treatment of advanced multiple myeloma, but hopes were high.
Indeed, some were suggesting Kyprolis could be capable of driving as much as $3 billion in revenue, if it was approved for other indications.
Since then, Amgen has won approval of Kyprolis as part of a combination therapy for relapsed multiple myeloma and as part of a combination treatment of refractory multiple myeloma, allowing Amgen to carve out a little more of the $8 billion-or-so multiple myeloma market. With this failure, however, owners of AMGN stock may be wondering if their hopes were misplaced.
The setback couldn’t have come at a worse time for Amgen shares, either.
Although AMGN performed heroically between 2012 and 2014, as of 2015 it hit a wall around $176; it struggled to move above that ceiling despite several attempts. Sales and earnings have continued to grow, but the stock has been plagued by more question then answers.
The future of Kyprolis was one of those questions, though hardly the only one. There’s also the not-so-small matter of biosimilars. Even as Amgen was fighting to prevent Novartis AG (ADR) (NYSE:NVS) from introducing a biosimilar version of Amgen’s blockbuster drug Enbrel, Amgen was looking to introduce its own biosimilar version of Humira, from AbbVie Inc (NYSE:ABBV).
It’s just a microcosm of the much bigger advent of biosimilars, but as it turns out, that advent has been less dramatic than presumed. Investors were just getting ready to rekindle the bigger AMGN rally when Kyprolis reprised those doubts. AMGN stock is once again peeling back from a proven ceiling.
3 Reasons Not to Lose Faith in Amgen
While frustrating to the Amgen faithful, this setback for the stock may end up being nothing more than temporary. Though a high-profile miss, Amgen is still so much more than Kyprolis. Three bullish realities are still intact.
Amgen’s Pipeline Remains Impressive
While Kyprolis may not be the best fit as a treatment of advanced multiple myeloma, it still holds promise for other slivers of the blood cancer market. Even if Kyprolis wasn’t part of the pipeline though, Amgen’s still got eleven other phase 3 trials underway. One of those treatments, cholesterol drug Repatha, just met its Phase-3 goals.
It’s also got six biosimilars in the works, arguably making it one of the best-positioned names to make waves in that budding market.
Amgen Is Still a Growth Machine
Even with an alternative to Enbrel now on the market (Enbrel drove $5.3 billion worth of revenue in 2015), Amgen is into its seventh straight year of revenue growth and fifth straight year of income growth. A company doesn’t show that kind of consistency without a Plan A, Plan B and Plan C, each of which is impressive on its own.
Still in a Technical Uptrend
While the knee-jerk reaction from AMGN stock to the news was a bearish one, by biopharma standards, that’s not much; Amgen shares have lost more ground on less news. The bigger uptrend remains intact. In fact, we’re moving into a bullish time of year that could help carry Amgen stock higher all the same.
On average, between mid-October and the end of the year, biotech stocks gain nearly 8%. The couple of weeks between now and mid-October tend to be weak, but not enough to merit an exit than a re-entry a few days from now.
Bottom Line for AMGN Stock
Nobody wants to see one of their stock picks in the red. But, Kyprolis as a treatment for advanced multiple myeloma wasn’t a game-changer either way. Once the failure is forgotten in a few days, the focus is going to turn back on Amgen’s strengths, pipeline and growth trend.
There’s no reason to panic — or sell — here.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
